OPEC: The Future of Oil is Uncertain

The Organization of the Petroleum Exporting Countries has released its October 2012 Oil Market Report. The report reads: “The world economy still places a great amount of uncertainty upon future world energy consumption.” OPEC anticipates demand for oil declining 0.61 percent between 2011 and 2012 in North America, Western Europe, and OECD Pacific nations.

Demand for OPEC crude in 2012 has been revised up by 0.2 million barrels per day, to a total of 30.1 mb/d. This is down 0.1 mb/d from last year. In 2013, demand for OPEC crude is forecast to average 29.8 mb/d, a 0.3 md/d decline from this year.

The report points to a 0.3 percent decline in demand for gasoline in North America. The decline is a result of more fuel efficient cars, less miles traveled, and higher prices. California in particular has been hit hard with high prices recently. Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) were forced to suspend production at refineries due to power outages, and as a result gas prices in the state exploded, averaging nearly $4.49 per gallon on October 5. Prices remain high as one of Exxon Mobil’s refineries plans to flare until the end of the month.

“Oil demand in North America is totally dependent upon U.S. economic development and the level of gasoline prices,” the report states.

Oil and gas giants have done reasonably well in the last 52 weeks. Chevron and Exxon Mobil are both up over 17 percent. British Petroleum (NYSE:BP) and ConocoPhillips (NYSE:COP) grew more modestly at 6 percent and 9.6 percent, respectively. Equipment producers and contractors have suffered, with Transocean (NYSE:RIG) and Halliburton (NYSE:HAL) both dropping losing over 10 percent share value in the same period.

Non-OPEC oil supply is expected to increase by 0.6 mb/d in 2012 on lower supply coming out of Brazil, China, and the United Kingdom. The supply is expected to increase by 0.9 mb/d in 2013, spurred by growth in the United States and Canada, the stomping grounds of our resident energy titans.

The report also points to a trend in natural gas use as impacting oil demand. In the U.S., natural gas adoption is picking up not just in energy production, but in use for transportation and heating. This trend, “together with the low mileage driven, a recent decline in industrial production has affection oil use within the country on a massive scale,” reads the report.